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Sprague Resources (SRLP) to Report Q4 Results: What Awaits?

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Sprague Resources LP (SRLP - Free Report) is set to release fourth-quarter 2020 results before the opening bell on Thursday, Mar 4. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 24 cents per share on revenues of $680.13 million.

Let’s delve into the factors that might have influenced the refined fuel supplier’s performance in the December quarter. But it’s worth taking a look at Sprague Resources’ previous-quarter performance first.

Highlights of Q3 Earnings & Surprise History

In the last-reported quarter, the Portsmouth, NH-based partnership beat the consensus mark on solid execution and robust performance by its Refined Products unit. Sprague Resources reported net income per unit of 33 cents, surpassing the Zacks Consensus Estimate of a loss of 39 cents. Moreover, revenues of $390.5 million generated by this midstream operator had come in above the Zacks Consensus Estimate of $328 million.

As far as earnings surprises are concerned, Sprague Resources beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering an earnings surprise of 17.31%, on average. This is depicted in the graph below:
 

Sprague Resources LP Price and EPS Surprise

Sprague Resources LP Price and EPS Surprise

Sprague Resources LP price-eps-surprise | Sprague Resources LP Quote

 

Trend in Estimate Revision

The Zacks Consensus Estimate for the fourth-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates 44.2% deterioration year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 32% decline from the year-ago period.

 

Factors to Consider This Quarter

While pipeline entities like Sprague Resources have a lower correlation to oil and gas prices compared to its peers, this energy sub-industry hasn’t been immune to the coronavirus-induced downturn. With the collapse in refined products demand due to extensive stay-at-home orders, the partnership’s business took a big hit. However, recovering fuel prices and the relaxation of lockdowns helped its key Refined Products unit’s adjusted gross margins to improve 21.1% year over year to $40.4 million. This trend most likely continued in the fourth quarter as well on the back of improving business fundamentals. This might have buoyed Sprague Resources’ revenues and cash flows.

However, on a somewhat bearish note, the partnership’s natural gas sales volumes were down 14.9% in the third quarter from the corresponding period of 2019, while adjusted gross margin slumped 84%. This was primarily on account of the fuel’s tempered demand stemming from the continued impact of a coronavirus-induced economic slowdown. With growth yet to pick up sufficiently, Sprague Resources’ results might be impacted in the fourth quarter too.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Sprague Resources is likely to beat estimates in the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Sprague Resources has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 24 cents per share each.

Zacks Rank: Sprague Resources currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the partnership’s 0.00% ESP makes surprise prediction difficult for the stock this earnings season.

Stocks to Consider

While an earnings beat looks uncertain for Sprague Resources, here are some firms that you may want to consider on the basis of our model:

The Children’s Place, Inc. (PLCE - Free Report) has an Earnings ESP of +76.478% and a Zacks Rank #1. The firm is scheduled to release earnings on Mar 9.

You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) has an Earnings ESP of +3.08% and a Zacks Rank #3. The firm is scheduled to release earnings on Mar 4.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +2.07% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Mar 4.

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